The Decision of the European Court of Justice on Open Skies - How Can We Take Liberalization to the Next Level, 68 J

Journal of Air Law and Commerce Volume 68 | Issue 3 Article 2 2003 The ecD ision of the European Court of Justice on Open Skies - How Can We Take Liberalization to the Next Level Ruwantissa Abeyratne Follow this and additional works at: https://scholar.smu.edu/jalc Recommended Citation Ruwantissa Abeyratne, The Decision of the European Court of Justice on Open Skies - How Can We Take Liberalization to the Next Level, 68 J. Air L. & Com. 485 (2003) https://scholar.smu.edu/jalc/vol68/iss3/2 This Article is brought to you for free and open access by the Law Journals at SMU Scholar. It has been accepted for inclusion in Journal of Air Law and Commerce by an authorized administrator of SMU Scholar. For more information, please visit http://digitalrepository.smu.edu. THE DECISION OF THE EUROPEAN COURT OF JUSTICE ON OPEN SKIES - HOW CAN WE TAKE LIBERALIZATION TO THE NEXT LEVEL? RUWANTISSA ABEYRATNE* I. INTRODUCTION M R. JEFFREY N. SHANE, Associate Deputy Secretary of the Department of Transportation, addressing the American Bar Association's Forum on Air and Space Law on November 8, 2002, gave an aufait interpretation of the much awaited but pre- dictable decision of the European Court on the open skies agreements between eight European States and the United States, which had been reported to the Court by the European Commission for adjudication. At the end of his presentation, Mr. Shane asked the pertinent question: "How can we take liberalization to the next level?" He then offered some cohesive and logical scenarios. There are certain aspects of the European Court's decision that led to misconception and misinterpretation immediately after the decision. Mr. Shane's presentation was the clearest and the most accurate interpretation that was given soon after the decision. This article will attempt to pick salient issues from the judgment, analyze them from perspectives of both sides of the Atlantic, and offer the author's personal insight as to "how we could take liberalization to the next level." In December 1998, the European Commission applied to the European Court of Justice for its adjudication of instances where seven European Union (EU) Member States had concluded bilateral "open skies" agreements with the United States in the field of air transport.' The court held oral proceedings in * The author, who is a senior official at the International Civil Aviation Organization, has written this article in his personal capacity. The opinions expressed are personal to the author and should not be attributed to ICAO. I The seven States are Austria, Belgium, Denmark, Finland, Germany, Luxem- bourg, and Sweden. An eighth case was brought against the United Kingdom. 485 486 JOURNAL OF AIR LAW AND COMMERCE May 2001 and subsequently considered conclusions of the Advo- cate-General issued on January 31, 2002.2 The European Court of Justice issued its judgment on November 5, 2002.' The genesis of contention, insofar as the European Commis- sion was concerned, occurred in 1992 when the Member States of the EU jointly agreed to create a single European market in air transport. Broadly, this meant that air carriers of the EU Member States could carry passengers and freight on an intra- EU basis territorially, using liberalized commercial rights. This decision in limine accorded to European Community airlines equal rights at law to operate air services from their home bases. Furthermore, European Community airlines became ipso facto airlines of the EU with the same rights and on the same terms as local airlines in any given EU territory. A natural corollary to this agreement was the Commission's belief that such a broad initiative to remove trade barriers in market access would encourage competition among EU carriers within the Union, particularly because European carriers could take the benefit of servicing from their home base and establish commercial operations anywhere in the EU on an equal basis, regardless of who the carrier may be. More importantly, one can ascribe to the European Commission a reasonable expecta- tion that the initiative to liberalize would bear the importance of a common EU external policy toward countries outside the Union. Based on the above logic, the Commission took the position that it would be inconsistent with the aims of liberalization ini- tiatives if Member States were to negotiate and finalize bilateral agreements pertaining to air transport services with countries outside the EU. The Commission believed that a concerted sin- The Netherlands joined the respondent States in support as a party to the litiga- tion in October 1999. 2 At the time of writing, the Commission was considering the scope of legal action against the Netherlands, France, Italy, and Portugal, all of which have since concluded bilateral agreements with the United States. 3 Case C-466/98 Commission v. United Kingdom [2002] O.J. (C323/1); Case 467/98 Commission v. Kingdom of Denmark [2002] O.J. (C323/2); Case 468/98 Commission v. Kingdom of Sweden [2002] O.J. (C323/3); Case C-469/98 Com- mission v. Republic of Finland [2002] O.J. (C323/4); Case C-470/98 Commission v. Hellenic Republic [2002] O.J. (C259/3); Case C-471/98 Commission v. King- dom of Belgium [2002] OJ. (C323/5); Case C-472/98 Commission v. Grand Duchy of Luxembourg [2002] O.J. (C323/6); Case C475/98 Commission v. Re- public of Austria [2002] O.J. (C323/7); Case C-476/98 Commission v. Federal Republic of Germany [2002] O.J. (C323/8). 2003] EUROPEAN COURT ON OPEN SKIES 487 gle market approach to bilateral negotiations by the EU against non-EU countries would ensure the pristine equity of a single European market and effectively preclude unfair competition from non-EU carriers who may not meet the stringent criteria that EU airlines must satisfy to gain EU carrier status. There- fore, it was the contention of the Commission that non-EU carriers should be granted market access to territories in the EU only if such carriers satisfied criteria that were acceptable to the Union as a whole and not on an individual State-by-State basis. Another argument adduced by the Commission in support of the principle that bilateral air services agreements should be ne- gotiated with non-EU States only by the EU and not by individual EU Member States was anchored by the reasoning that if EU States were to individually allocate air traffic rights in the tradi- tional manner to foreign destinations based on nationality, dis- crimination against national flag carriers of separate EU Member State carriers would result, vitiating the treaty provi- sions that governed the liberalization initiative. The Commis- sion argued cogently that any negotiation based on individual nationality may hinder competition between EU airlines who will be constrained to defend and safeguard their national inter- ests. Such a constraint would have far reaching consequences adversely affecting the overall progress of the European econ- omy and industry. In pursuance of its strong views on individual bilateral negotiations against an EU-based common approach, the Commission requested EU Member States to refrain from entering into any new agreements, particularly with the United States. The United States in 1994, issued an "International Aviation Policy Statement" which advocated a global open aviation system and committed the United States to an "open skies" approach. 4 The United States open skies policy consisted of a liberalized bilateral and multilateral structure that would enable carriers to continue onwards to a third country from a destination (usually called "Fifth Freedom" rights). For example, in the context of the United States and Europe, a carrier could operate air services from New York to Paris and onwards to London. Although the Commission requested EU Member States to desist from entering into bilateral agreements individually, all Members States signed open skies agreements with the United 4 International Aviation Policy Statement, 1994, available at http://www.state. gov/index.html. 488 JOURNAL OF AIR LAW AND COMMERCE States except the UK- Although agreeing to nationality princi- ples, the US/UK bilateral agreement did not go so far as to con- clude an open skies agreement with the US. The major contention of the Commission against the open skies agreements was that such agreements eroded the fundamental pre- mise that the EU was one large liberalized market. Although the Commission conceded that open skies agreements may ac- cord benefits to consumers, it believed that the open skies agreements between the United States and EU Member States would provide the United States carriers with significant opera- tional benefits in Europe without according reciprocal benefits to European carriers in the United States. In practical terms, the Commission claimed that under the agreements, although American carriers could operate air services from any point in the United States to any point in Europe, the European carriers were restricted to operating services to the United States only from their home bases. Additionally, it was argued that nationality restrictions incorporated in the open skies agreements would stultify intra-European investment and rationalization. Therefore, it was the Commission's submission to the Euro- pean Court that the only reasonable manner in which negotiations with the United States could be carried out was to approach negotiations as a block so that the leverage of the EU States could be pooled. The Commission claimed that the pool- ing approach was being used by EU States in other areas of commercial interaction with non-EU States and that air transport should be no exception. Thus, the Commission claimed that only they could negotiate air transport agreements on behalf of all EU States.

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